2015 (2) TMI 229 - HC - Central Excise

Waiver of pre deposit - Undue hardship - Held that - A perusal of the balance-sheets, would show that the Company is running into losses and it does not have any free reserves and surplus. The losses have not eroded the net worth but that the losses are substantial, which will not enable the Company to make pre-deposit of 25% of the assessed duty demand. - counsel appearing for the appellant contends that the Finance Act, 2014 has omitted Section 35C of the Central Excise Act, for pre-deposit, and that now the pre-deposit with effect from 01.10.2014, has been confined to 7.5% of the demand in case of an appeal, and 10% of the demand in case of second appeal, to make the remedy of appeal effective and to avoid the CESTAT to spend most of its time only in deciding matters of pre-deposit. - In the meantime, in case the appellant deposits 10% of the demand, excluding the demand of penalty, within a period of sixty days from today, after adjusting the amount of ₹ 5 lakh, which has been deposited, the recovery of the remaining amount shall remain stayed. - Decided conditionally in favour of assessee.

Issues:
1. Modification of stay order regarding deposit requirements for duty demand and penalty.
2. Dismissal of appeal due to non-compliance of pre-deposit order.
3. Financial hardship faced by the appellant in making the required deposits.
4. Evaluation of appellant's financial position based on submitted balance sheets.
5. Comparison of appellant's losses and reserves with the pre-deposit requirements.
6. Legal precedents and judgments cited by the appellant's counsel.
7. Impact of the Finance Act, 2014 on pre-deposit requirements for appeals.
8. Decision to proceed with a hearing based on the presented facts and circumstances.

Analysis:
1. The first issue revolves around the appellant's appeal against the modification of a stay order by the CESTAT, which required a deposit for duty demand and penalty. The CESTAT based its decision on electricity consumption data and evidence from investigations, rejecting the argument that electricity consumption alone cannot determine production levels. The court found similarities between this case and others where duty demands were confirmed based on similar evidence.

2. The second issue concerns the dismissal of another appeal by the appellant due to non-compliance with a pre-deposit order. The appellant failed to provide proof of pre-deposit as directed, leading to the dismissal of the appeal by the CESTAT.

3. The third issue highlights the appellant's argument regarding financial hardship in making the required deposits. The appellant claimed a strong case for appeal success but lacked the financial capacity to meet the pre-deposit conditions, potentially making the remedy of appeal illusory.

4. Moving on to the fourth issue, the court examined the appellant's financial position based on submitted balance sheets of the last five years. The analysis revealed that the company was facing substantial losses without any free reserves or surplus, indicating an inability to make the necessary pre-deposits.

5. The fifth issue delves into the comparison between the appellant's financial status, losses, and reserves with the pre-deposit requirements set by the CESTAT. The court noted that the company's losses were significant, making it challenging to meet the 25% duty demand deposit.

6. The sixth issue involves legal precedents and judgments cited by the appellant's counsel to support their case, including a decision where a demand based on electricity consumption was dropped, emphasizing that high electricity consumption alone cannot determine liability for excise duty.

7. The seventh issue addresses the impact of the Finance Act, 2014, which reduced pre-deposit requirements for appeals to 7.5% of the demand, aiming to make the appeal remedy more effective and expedite CESTAT proceedings.

8. Finally, considering the presented facts and circumstances, the court decided to proceed with a hearing on the matter, issuing notice to the respondents and allowing a partial stay on recovery if the appellant deposits 10% of the demand within a specified timeframe, after adjusting the previously deposited amount.

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